Corporation Tax and changing company year end

Is there any advantage in changing company year end in relation to Corporation Tax

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Limited Company was set up on 18th February 2017. Did not trade in the first year but will start trading in August 2018 with income (profit) of around 30,000 per month.

My understading at the moment is that his first Corporation Tax year should be from 1st August 2018 to 31st July 2019 which will take some profits from Accounting Year End 28th February 2019 and some from Accounting Year End 29th February 2020.

The CT will be payable by 30th April 2020 so the February 2020 Accounts will need to be prepared pretty quickly by April 2020 so that the CT Return can be done.

Is this correct? All the previous CT returns I have done have been with the Accounting and CT Tax Periods being the same.

Client has asked if he extends the Accounting Period will this give him longer to pay the CT. I don't think this is the case because CT tax periods can't be longer than 12 months. Just wondering if I am missing something or misunderstanding something? Could there be any tax benefit from extending the Accounting period?

Might it be worth saying the business started trading in March 2018 so the Accounting and Tax years align?

Replies (4)

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By johngroganjga
19th Jun 2018 14:34

No it’s not correct. You are getting mixed up. There is a rule that a CT accounting period can’t be longer that 12 months. But there is no rule saying it can’t be shorter.

Thanks (3)
19th Jun 2018 14:39

Assuming there are no transactions to be reported before the August 2018 start date and the year end is not changed you will need to prepare accounts from 18th February 2017 to 28th February 2018 and 1st March 2018 to 28th February 2019 and file a CT600 that goes from the start date in August 2018 to 28th February 2019

Thanks (4)
Replying to GW:
By Matrix
19th Jun 2018 15:11

No need for two sets of accounts. Ignore this. Sorry I got the start date wrong, it is 2017 not 2018 so have amended my reply below.

Thanks (0)
By Matrix
19th Jun 2018 14:57

I would change the year end to July and prepare accounts from March 2018 to July 2019 (having prepared dormant accounts to Feb 18).

The corporation tax return will cover the period from Aug 2018 to July 2019. This is if you are sure the company has not started trading already.

The benefit is that this will delay the due date for the tax and also mean accounting fees are saved. Alternatively if you didn't change the year end the accounts and tax return would both be to Feb 2019.

Thanks (1)